Often our clients ask us about asset preservation planning. This typically comes up in the context of either estate tax planning or medicaid planning.
Asset preservation planning requires the individual to consult with experienced professionals concerning their needs. This may include your accountant, financial planner and an experienced elder law attorney. The team will work with you on formulating a plan for the transfer of resources.
Assuming that you begin to make changes to your assets, by transferring those cash assets to family members and re-allocating assets, you need to know the ramifications of those actions. Any action taken depending on the amount of the transfer has a potential consequence. The question becomes whether the risk taken is worth it. That all depends on your own comfort level with transferring assets out of your name and into the name of another individual, a trust or another entity.
In the medicaid context, timing is everything. Any transfer made outside of the sixty months (5 year) look back period creates no penalty for the Medicaid applicant. In other words, the quicker you start disposing of assets, the easier it is to shield the assets from Medicaid if nursing home care is needed in the future. On the other hand, any transfers without full consideration made within five years of applying for Medicaid will subject the Medicaid applicant to a "penalty", resulting in the denial of benefits for a finite time period.
For tax planning, switching assets into the name a trust or a corporation, may create long term tax savings for the estate, especially if the asset transferred grows substantially inside the trust or the legal entity. The trust or corporate entity could allow the gifting of assets inside the business to others thus minimizing assets. In addition, your estate may also be able to save taxes on a corporate entity by taking significant discounts on the individual's interest in the corporation as a result of the minority ownership interest.
You should always consult with experienced estate planning concerning your needs. The attorneys at Weiss & Tom will help you formulate a plan that takes into account your needs and wants. For more information on asset preservation planning, please contact the attorneys at Weiss & Tom online.